Time Warner Cable Inc. (TWC) – the second largest cable MSO in the U.S. – plans to increase rates on the back of multiple deals signed with different sporting majors like Los Angeles Galaxy, Los Angeles Sparks, Los Angeles Lakers and Los Angeles Dodgers.

The demand for sports network is always on the rise. In order to tap the growing demand mainly across Los Angeles and Hawaii regions, Time Warner Cable launched two specialized sports networks namely Time Warner Cable SportsNet and Time Warner Cable Deportes in October last year.

In an effort to popularize these channels, Time Warner Cable is continuously expanding its local sports coverage by signing long standing telecast agreements with Los Angeles-based popular teams in different categories.

The recently signed 25-year contract with the popular baseball team Los Angeles Dodgers is expected to cost Time Warner Cable more than $7 billion. Moreover, the company has already spent around $3 billion on its 20-year agreement with the basketball team Los Angeles Lakers.

These hefty fees of more than $450 million per annum will increase the programming costs for Time Warner Cable. So, to offset the rise in costs, the company started charging an extra $2.25 per month from those subscribers, who have taken the two Lakers channels. However, these channels are free for those who opt bundle package services. Moreover, the company will also hike rates on basic programming packages in Los Angeles by 8.2% to $72.50 and its DVR rental fee by 18.6% to$12.99 per month.

Furthermore, Time Warner Cable will also gain from the distribution rights sold to other pay-TV majors like DirecTV (DTV), AT&T Inc.’s (T) U-Verse and Verizon’s FiOS TV.

The trend to pass over the fees to its respective customers is gaining popularity across pay-TV industry as both Dish Network Corp. (DISH) and DirecTV have recently hiked its programming rates. So, in the near future, the subscribers tend to be the ultimate losers if these higher rates are not absorbed by these pay-TV companies, thereby forcing these subscribers to move towards low cost video streaming companies.

Currently, Time Warner Cable has a Zacks Rank #3 (Hold).

Earnings Preview: Dominion Resources

Dominion Resources Inc. (D) is slated to release its fourth quarter 2012 financial results before the market bell on Jan 31, 2013. In the last quarter, the power generation, distribution and transmission company posted a negative surprise of 5.15%. Let’s see how things are shaping up at Dominion prior to this announcement.

Factors to Consider This Quarter

The expectation of normal winter will definitely benefit Dominion and the successful outcome of the Virginia Fuel rate case will also boost the top line. The growth projects which were completed at Dominion Energy are likely to add to revenue.

However, we need to watch out for lower merchant generation margins and a higher tax rate. The regular operations during the quarter were disrupted by Hurricane Sandy, which will definitely have an impact on the quarterly performance.

Earnings Whispers

Our proven model does not conclusively show that Dominion Resource is likely to beat earnings this quarter. That is because a stock needs to have both a positive earnings Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. This is not the case here.

Negative Zacks ESP: This is because the Most Accurate estimate stands at 62 cents while the Zacks Consensus Estimate is higher at 67 cents, resulting in -7.46% ESP.

Zacks Rank #3 (Hold): Dominion’s Zacks Rank #3 when combined with negative ESP makes surprise prediction difficult. We caution investors against the stock going into the earnings announcement, as a negative Zacks ESP lowers the possibility of an earnings surprise.

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